Research Administration Office

University of California

Memo Operating Guidance

No. 85-27

September 12, 1985

Subject: Certification of Overhead Costs in Department of Defense Contracts

BACKGROUND

An interim rule published in the Federal Register of March 27, 1985, added new sections to the DoD Supplement to the Federal Acquisition Regulations (DFARS) which stated, in part:

No submission of a request for payment of indirect costs shall be accepted...unless such costs have been certified by the contractor's Division Vice President or equivalent, using the Certificate of Overhead Costs in the clause at 252.242-7003.

The referenced clause included the statement that the request for payment of overhead costs "does not include any costs which are unallowable under applicable cost principles," and required a signature under the following declaration:

I declare under penalty of perjury that the foregoing is true and correct.

Subsequent discussion and correspondence, while they did not succeed in exempting universities, resulted in the following interpretation of the rule.

INTERPRETATION OF THE CERTIFICATION REQUIREMENT

The certification needs to be signed for each of the University's indirect cost Negotiation Agreements with the Department of Health and Human Services. The Associate Vice President--Business and Finance has signature authority for all campuses for this certification. Every time a new Negotiation Agreement is signed, a new certification must also be signed. It is not necessary to include the certification on invoices for particular DoD contracts.

PROCEDURES

Procedures for implementing the certification requirement were developed by campus indirect cost negotiators and the Federal Systems Committee. A copy of the procedures is enclosed. To date, the Associate Vice President--Business and Finance has signed certifications for five campuses (Berkeley, Davis, Irvine, Los Angeles, and San Diego) and forwarded them to ONR Resident Representative, Robin Simpson. The remaining four certifications are expected to be signed as soon as they are received from the respective campus Vice Chancellors.

C& G Officers should be aware that new DoD contracts will contain references to the clause at 252.242-7003. For the Berkeley, Davis, Irvine, Los Angeles, and San Diego campuses, the relevant DoD contracting office may be informed that the certification of overhead costs as required by DFARS 242,770 was executed on September 5, 1985'. No additional certification should be made. The other four campuses will be informed by this office when the certification is signed for their campus.

Refer: Bill Sellers ATSS 8-582-3045 (415) 642-3045

Subject Index: 08

Organization Index: F-175

David Mears

University Contracts and

Grants Coordinator

Enclosures

cc:

Director Selby, w/o encl,

Accounting Officers

*Note, for Berkeley, Davis, Irvine, Los Angeles, and San Diego: A copy of the certification for your campus is enclosed.


FINANCIAL ANALYSIS OFFICE

Enclosure, C& G Memo No. 85-27, 9/12/85

FSC HANDOUT AUGUST 1985

DOD INDIRECT COST CERTIFICATION PROCEDURES

BACKGROUND

Campus Indirect Cost Negotiators were invited to a meeting on July 1985, to review proposed procedures for complying with DOD certification requirements published in the March 27, 1985, Federal Register. Copies of the Federal Register and amplifying DOD and ONR letters were distributed. The following points were covered:

Certification is required for all indirect cost rate agreements executed after March 20, 1985. Otherwise no payment of indirect costs.

Proscribed certificate without additions, deletions or comment must be signed by the appropriate Vice President. ONR has agreed that Associate Vice President Pastrone is to sign for the University.

DOD issued the following amplifying letters:

1. (Cox - April 4, 1985)

a) Certification does not require signer to assure that the cost will be finally allowed. Signers are required to certify that in good faith they believe the costs are allowable and they have reviewed the claims to satisfy themselves that this is so.

b) Certification is not intended to modify standards for allocating indirect costs. Signers certify in good faith that established cost allocation procedures were used.

2. (Gilleece - April 5, 1985)

Certification is not required for each request for payment.

(Simpson - July 17, l985)

It is understood universities will be certifying to OMB Circular A-21 definition of unallowable costs.

UNIVERSITY PROCEDURE

Because the preparation and negotiation of indirect cost rates are the joint responsibility of the Office of the President and the campuses, AVP Pastrone's certification will be based, in part, on a certification of the appropriate Vice Chancellor of each campus. The campus certification is attached.

Campus certifications were sent to campus Indirect Cost negotiators on August 7, 1985. The goal is to have all certificates filed by August 30, 1985.


CAMPUS CERTIFICATION AS TO THE ALLOWABILITY OF INDIRECT COSTS

Associate Vice President Pastrone

Subject: Certification of Overhead

In order for the campus to collect the indirect costs of Department of Defense contracts based on the indirect cost rates published in the OMB Circular A-88 Negotiation Agreement dated ---. I understand that you must sign a certification, under penalty of perjury, that the costs used to negotiate the rates contained therein are allowable consistent with our current understanding of OMB Circular A-21 cost principles.

To provide a basis for your certification I hereby affirm that the following statements are true:

I have read the certification to be signed by you and understand what is required.

I, or a senior staff person appointed by me, have: a) reviewed the Indirect Cost System cost coding of campus data assigned to the indirect cost pools in the FY ---- indirect cost proposal based on FY --- data on which the above rates were negotiated, b) determined that all such accounts are allowable under the Cost principles in OMB Circular A-21.

I, or a senior staff person appointed by me, have reviewed the internal controls and accounting systems in place and believe that the costs are distributed correctly to the appropriate accounts some of which are used in the preparation of the indirect cost proposal.

/s/

Vice Chancellor


Re: A-88 Negotiation Agreement dated May 8, 1985 Berkeley Campus

This is to certify that:

1. I have reviewed the claim submitted herewith,

2. All costs included in this claim for final settlement for 1 July 1985 through 30 June 1989 are allowable in accordance with the requirements of contracts to which they apply and with the cost principles of the Department of Defense applicable to those contracts,

3. This claim does not include any costs which are unallowable under applicable cost principles of the Department of Defense such as (without limitation): advertising and public relations costs (FAR 31.205-1), contributions and donations (FAR 31.205-15), lobbying costs (FAR 31,205-22), defense of fraud proceedings (FAR 31.205-47), and good will (FAR 31.205-49), and

4. All costs included in this claim benefit the Department of Defense and are demonstrably related to or necessary for the performance of the Department of Defense contract(s) covered by the claim.

Signature:

Name of Corporate Official:

Title:

Date of Execution:

#

I declare under penalty of perjury that the foregoing is

true and correct.

Joseph A. Pastrone

Assoc. Vice President - Business & Finance

September 5, 1985

DFAR 52.242-7003, CERTIFICATION OF OVERHEAD COSTS (MAR 1985)